28 Feb
What is the assessment year (AY) and financial year (FY) in an Income Tax?
What is the assessment year (AY) and financial
year (FY) in an Income Tax?
Many taxpayers
confuse fiscal year (FY) and assessment year (AY). They usually treat them the
same, which is why they make mistakes when filing income tax returns.
What is a financial year?
The financial
year (FY) is the period between April 1 and March 31 - the accounting year in
which you earn income.
What is an assessment
year?
The assessment
year (AY) is the year following FY. This is the time in which the income earned
in a financial year is assessed and taxed. Both FY and AY start on April 1 and
end on March 31. For example, for the fiscal year 2020-21, the assessment year
is AY 2021-22.
AY & FY of recent
years
|
Period |
Financial Year (FY) |
Assessment Year (AY) |
|
01/04/2021 to 31/03/2022 |
2021-2022 |
2022-2023 |
|
01/04/2020 to 31/03/2021 |
2020-2021 |
2021-2022 |
|
01/04/2019 to 31/03/2020 |
2019-2020 |
2020-2021 |
|
01/04/2018 to 31/03/2019 |
2018-2019 |
2019-2020 |
|
01/04/2017 to 31/03/2018 |
2017-2018 |
2018-2019 |
|
01/04/2016 to 31/03/2017 |
2016-2017 |
2017-2018 |
What is the difference
between AY and FY?
From an income
tax standpoint, FY is the year in which you earn income. AY is the year after
the financial year in which you have to assess the previous year's income and
pay tax on it.
For example, if
your fiscal year is 1 April 2020 to 31 March 2021, it is known as the fiscal
year 2020-21. The valuation of money earned during this period will start after
the end of the financial year - that is, 1 April 2021 to 31 March 2022.
Therefore, the valuation year will be AY 2022-23.
Why is AY in ITR form?
Since tax is
levied in the assessment year of income of any particular financial year, the
income tax return form contains the assessment year (AY). Income earned in a
financial year cannot be taxed before it is earned, so it is taxed in the
following year.
In the middle
or at the end of the financial year, there may be situations like loss of job,
change of job, new investment etc. Also, the income earned in a financial year
cannot be known exactly before the end of the financial year. Therefore, the
assessment can start only after the end of the financial year. Therefore,
taxpayers have to choose AY when filing their income tax returns.
Regards
Alliance Tax
Experts
9769201316
#Whatisassessmentyearinincometax
#Whatisfinancialyear #assessmentyear2021-22
#incometax
#ayfy #ca #taxconsultant #charteredaccountantnearme #nearme #gstconsultant #gst